How to Profit from the Expected Obamacare Rally

By George Leong | Small Business

How to Profit from the Expected Obamacare RallySo a deal is done and, so far, it looks like Obamacare is here to stay, whether you like it or not. Regardless of your views on universal healthcare, you likely like to profit—and may be able to do just that from this new buying opportunity.

With the initiation of Obamacare, tens of millions of Americans who previously did not have coverage will be required to get coverage. And in the healthcare market sector, it will mean a new buying opportunity for investors to make money, as more than 32 million new entrants to the healthcare system will require more products and services. Obamacare will be a boon to the healthcare sector.

We will see a buying opportunity in the providers of health plans, along with pharmaceutical and medical device makers, who will market to a much larger user base.

An interesting requirement for the debt extension was a compromise by the House that will delay the tax on medical devices for two years. This should give this sector a boost over the next few years and likely beyond, which will also benefit investors with a buying opportunity in the healthcare area.

To play the move, there are numerous medical device companies that could benefit. An interesting company in the medical devices area is SurModics, Inc. (NASDAQ/SRDX), which could really benefit from Obamacare.

The company offers a technology that helps coat the surface of medical devices that makes them more effective. SurModics also provides this coating technology for the drug delivery process.

For SurModics, the company needs to prove to the market that it’s ready to deliver consistent results. I believe Obamacare and the avoidance of the medical device tax may provide a nice contrarian buying opportunity for speculators at the current price level.

The company has seen its fiscal revenues fall in three straight years to fiscal 2012. But there are some positive signs, as SurModics is estimated to grow its revenues 10.4% this year to $57.35 million, followed by 10.7% to $63.45 million in 2014, based on data from Thomson Financial.

The chart of SurModics below shows the company’s breakdown in May and current sideways channel, with a possible upward breakout (as shown by the upper shaded oval) and a possible buying opportunity. A break could see the stock drive higher toward the $28.00 level and above.

SurModics Chart

Chart courtesy of www.StockCharts.com

In my view, SurModics represents a good contrarian buying opportunity that will be helped by the added spending in the healthcare area once Obamacare is initiated.